Wednesday, 1 October 2014

Minimum pricing model wheeled out once more

The latest flurry of activity from Sheffield University's minimum pricing activists researchers appeared today. As ever, it made headline news at the BBC...

Minimum unit price '50 times more effective' than alcohol floor price

A minimum price is a floor price. If a BBC hack doesn't understand basic terminology, s/he is unlikely to be able to get to grips with a speculative and partisan estimate from a deeply flawed computer model.

The gist of the press release (there is also a study, but the study is more of an appendage to the press release than vice versa) is that the ban on alcohol being sold below cost price will have much less effect on alcohol consumption—and therefore, in the eyes of the activists researchers, alcohol-related harm—than a minimum unit price of 45p.

A few things need to be said about this...

1. The study, which has been published by the British Meddling Journal, is just the umpteenth reworking of tired old guesstimates about the possible effect of a 45p minimum price. Aside from the fact that no one is campaigning for a 45p minimum price any more (it is now 50-60p), the Sheffield model is based on absurd assumptions, such as the belief that heavy drinkers are more price sensitive than light drinkers, and it uses price elasticities that are at odds with almost everything that has ever been written about the demand for alcoholic beverages in the economics literature.

2. The claim that minimum pricing would be '50 times more effective' (ie. would reduce consumption by 50 times more) is also not new. The Sheffield activists researchers announced this factoid last year - in one of its many press releases - when the government announced the ban. They said:

The Sheffield modelling estimates that the impact of a 45p minimum price
would be around 40 to 50 times larger than that of banning below-cost
selling.

This factoid was eagerly taken up by their friends at the Institute of Alcohol Studies (formerly, and more appropriately, known as the UK Temperance Alliance), who issued their own release saying the same thing. Today's announcement is, therefore, a reworked version of a 16 month old, policy-driven press release that was based on a hastily cobbled-together figure.

3. The government only banned the sale of alcohol below cost price (actually below duty+VAT) because the 'public health' lobby spent years whipping up hysteria about supermarkets selling alcohol as a loss leader. Those of us who live in the real world knew that such a ban would have very little effect because we knew that hardly any alcohol is sold below cost price. It was a temperance lie from day one.

4. More recently—ie. since the government capitulated on below cost sales—the temperance lobby has turned its back on the loss-leader argument and has claimed instead that a ban "will have no effect at all on health". Claiming that minimum pricing will be fifty times more effective than something that will have "no effect at all" is the same as multiplying bugger all by fifty. The new(ish) Sheffield study actually reckons that a below-cost ban will save 14 lives a year, based on a reduction in per capita alcohol consumption of three units. This is because they make daft assumptions about per capita consumption and alcohol-related mortality having a direct, linear relationship. A more realistic estimate is that it will save about as many lives as a 45p minimum price, ie. none.

5. Since the Sheffield activists academics started modelling the impact of minimum pricing in 2008, per capita alcohol consumption has fallen much more sharply than they predicted would happen under their pet policy. They have yet to explain why all the glorious health outcomes that should have accompanied this decline have failed to reveal themselves.

6. The problem with minimum pricing is not that it will have more (or less) effect than a policy that no sane person thought would have any effect, but that it is deeply regressive, iniquitous and illegal. Resurrecting the corpse of the Sheffield computer model will not change that, nor will it alter the fact that the model itself is a waste of time, energy and taxpayers' money.

About Me

Writer and researcher at the Institute of Economic Affairs. Blogging in a personal capacity.
Author of Selfishness, Greed and Capitalism (2015), The Art of Suppression (2011), The Spirit Level Delusion (2010) and Velvet Glove, Iron Fist (2009).

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience."